There’s been a suggestion that the 2018 tax bill gives a great advantage to farmers selling grain to cooperatives. This relates to the new Sec. 199A deduction, which grants a 20% deduction from income for many businesses, including farmers. Vagaries in the legislation would indicate farmers would be greatly advantaged to sell their grain to cooperatives.
According to Iowa State University Center for Agricultural Law and Taxation, a strict reading of the law as written might give that result. However, that isn’t the intent of the law, and as we noted on our 2018 Republican tax law page, there will be corrections and interpretations that will implement the new law as Congress intended.
Our advice is to sell your grain where it makes sense to sell, notwithstanding any messages you’re getting from cooperatives right now. We don’t believe the Sec. 199A deduction is in any danger in the current Congress, so you don’t need to call your legislators to implore them to keep it. We assume, as the folks at Iowa State assume, there will be a correction in the legislation to keep the playing field level for grain buyers.
March 27 2018 update here.